Toyota and Ford: Strategies and Tactics - Essay Example

? Toyota and Ford: Strategies and Tactics Table of Contents I. Introduction 3 II. Discussion 3 A. General Overview 3 B. Operations 5 D. Product Quality 7 E. Pricing 8 F. Product Differentiation 9 G. Customer Service Levels, Customer Satisfaction, Issues 9 Works Cited 11 I. Introduction This paper discusses the strategies and tactics of Ford and Toyota, with a focus on the following aspects: competencies that are distinctive, order qualifiers and order winners for the two firms. The areas considered for the two firms include operations, product quality, differentiation relating to product, issues relating to customer satisfaction, and pricing. Ford and Toyota are in the business of automobiles manufacturing, and also are in the business of running peripheral businesses such as automobiles financing. Ford has two business segments in the main, representing vehicles production and financing, while Toyota has a third business segment that is minor relative to its vehicles and financing, and that third division is involved in information technology, communication technology and housing manufacture and sale. Ford has lately moved into the software business too, with its purchase of the Livio Company, putting it in more direct alignment with the interests and pursuits of Toyota. One can see that those third businesses from the two firms, especially relating to software and information technology, complement their vehicles manufacturing businesses in many ways (Google; Google (b); “Ford Motor Company”; “Toyota Motor Corporation”). II. Discussion A. General Overview The core of the companies’ operations are concentrated on vehicles manufacturing, where Ford for instance is focused on the manufacture and marketing of two core brands, Ford and Lincoln, which make their presence in six continents all over the world, but heavily focused on certain key markets, including 19 such core target markets located in Europe, and 12 key markets in the Asia and Pacific region, with five of those twelve, including China, India and the ASEAN being most key. Toyota on the other hand has a wider range of vehicle lines, from cars to minivans, to commercial vehicles, and owns a stable of brands that includes Toyota, Hino, Daihatsu, and Lexus. Both are in the business of manufacturing and supplying parts as well, and their finance businesses are geared primarily towards financing their own vehicle sales and their own distribution networks and dealer networks. The integration of financing with vehicle manufacture as well as marketing is arguably a business model that works to improve revenues and to improve differentiation for the two firms over time. Put another way, financing complementing manufacturing can be construed as an order qualifier for the industry, and a source of sustained differentiation for the two firms, given the scale of their businesses and the size of the available financing necessary to fund the large revenues and global footprints of the two firms (Reuters; Reuters (b)). In terms of financial performance, both have done well from lows in the latter part of the last decade, with the share prices of both firms on an upward trajectory over the past five years. Currently Toyota’s market capitalization is close to US 200 billion dollars, while Ford’s market capitalization is about a third of that, at US 65 billion dollars. The plots below detail share price histories for the two firms from 2008 to the present (Google; Google (b)) Toyota Share Price History Graph Source: Google (b) Ford Share Price History Graph Source: Google B. Operations Both Toyota and Ford are global in operations, even as the manufacturing and logistics are run from a number of manufacturing facilities in key markets, while overall operations are run out of company headquarters in Japan and in the United States, respectively. Ford’s distribution network consists of dealerships that are owned by independent business concerns, where all of Ford’s vehicles and parts and services are coursed exclusively through those dealerships. As already discussed earlier, the distribution dealerships are focused on some key markets, 19 in all in Europe, and 12 in the Asia and Pacific region, which includes China and India, as well as the ASEAN. On the other hand, Toyota has a similar distribution network spread out all over the world, serviced by regional manufacturing centers in the key geographies, and complemented by Toyota Financial Services present in 32 different markets all over the world (Google; Google (b); Reuters; Reuters (b)). Moving forward, operational plans at Ford include increasing the flexibility of all of its manufacturing plants to accommodate four different car models by 2017, and moving to a three-shift model for its manufacturing for all but 10 percent of all those plants likewise by 2017. Those moves are expected to increase productivity at the manufacturing plants by 30 percent. Also, there is a move to streamline core platforms from 15 to just 8 by 2017, even as Ford intends to invest in manufacturing capacity with slated openings of manufacturing facilities in Brazil, Romania, China, Thailand and Russia among others in 2014 (Quintaro). Ford operations is also characterized by a shift in focus into Asia, as evidenced by its Asian operations outpacing the growth of operations in Europe and the United States, to the point that total output in China and Asia has exceeded those in the US and in Europe (Worthington). In the Asia, moreover, Ford has plans to up its total manufacturing facilities to 24 by 2014 from 12 in 2012, of which seven are to be in China, in anticipation of the growth in demand in China and Asia by 2020, when the region will account for about a third of global sales of cars. In the ASEAN Ford has five plants in all (Apostolides). In comparison to Ford, however, Toyota’s manufacturing footprint and scale of operations is much larger. As of the end of last year, Toyota’s manufacturing footprint extended to 27 different nations and regions all over the world, and 52 manufacturing facilities in all, all of them located outside of Japan. The base of sales operations meanwhile is even larger, covering in excess of 160 different nations and regions worldwide. The following map details the global scale of Toyota’s manufacturing operations (Toyota Motor Corporation): Map Source: Toyota Motor Corporation It can be said that scale and excellence in manufacturing is one of the core strengths and a sustained source of differentiation for Toyota, something that is unmatched even by its top competitors, including Ford. The global footprint and massive manufacturing scale allows Toyota to disperse risks, reap benefits from scale economies, reap benefits from logistics via having manufacturing closer to the target markets, and being able to leverage manufacturing efficiencies to drive costs down across the board and be in a position to reap higher profits in the long term. Scale and efficiency in manufacturing, as evidenced in the discussion and map above, is a distinctive competency for Toyota (Toyota Motor Corporation; Google; Google (b); “Ford Motor Company”; “Toyota Motor Corporation”). D. Product Quality The ‘One Ford’ strategy instituted at the height of the crisis that pushed the top US manufacturers in the US is touted as being responsible for overhauling the general manufacturing strategy at Ford and had the result of pushing quality up, due to streamlined production and better engineering of its vehicles. On the other hand, that quality push at Ford is being undermined of late due to increases in demand taxing the capability of Ford to keep quality levels up as production levels go up, and recent recalls have put into question the sustainability of the quality initiatives at Ford (Seetharaman; Vandezande). In contrast, Toyota’s product quality is an essential aspect of its brand, and in general when one talks about product quality in vehicles one refers to Toyota, which had built a reputation for fuel efficiency and quality and as spearheading the quality reputation of Japanese cars from the 1980’s onwards, can be considered as being a leader not only in manufacturing excellence but also quality excellence Google; Google (b); “Ford Motor Company”; “Toyota Motor Corporation”). That said, by the turn of the new century Toyota also succumbed to problems related to quality, and this has been subjected to intense scrutiny in academic and trade circles, even as the quality problems impacted overall brand image for the company, and also impacted the sales of its vehicles in key markets around the world, including the US. The root cause of the rise in quality problems had been traced to a period of time when there was a change in leadership, and that change in leadership made a tradeoff between product quality and increased output to improve revenues in the short term. The shift in strategy to sell as many vehicles as possible resulted in quality suffering as production felt the strain of manufacturing loads well beyond what was sustainable for the company from an operations point of view. Since lows in product quality, however, it can be seen that Toyota has retooled itself and set itself back on course to correct the shortcomings in quality (Cole; Durisin and Trudell). E. Pricing Pricing for both Ford and Toyota are a function of the positioning of its brands and vehicle models. For Toyota its line of mainstream vehicles are competitively priced relative to US counterparts, and it has a premium segment in the Lexus line of vehicles where pricing is a function of its positioning in the premium segment. The premium positioning has price as an aspect, and in Toyota as in other car manufacturers the premium pricing reflects a strategy that is likewise in line with market expectations and the pricing of competitors in the premium space. Ford has its Lincoln brand positioned with an appropriate price for that premium segment, as a counterpart to Toyota’s Lexus. Its mainstream brand vehicles are priced to compete with Toyota and other key competitors (Toyota Motor Corporation; Google; Google (b); “Ford Motor Company”; “Toyota Motor Corporation”). F. Product Differentiation We can see that successful differentiation for Toyota consists historically in coming up with fuel-efficient vehicles that have high quality and low total cost of ownership. This is the flip side attribute of its excellence in global manufacturing and logistics carved out over many decades. Recently, differentiation for Toyota has taken the turn in terms of a greater focus on new innovation and expanding into key markets for new products into China. That means, in the case of China in particular, a new direction towards differentiating products based on an understanding of key customers in the growth markets of Asia and China in particular. There is an intense focus too on new technologies to drive product differentiation, through a focus on hybrids, for instance. In Ford, support manufacturing and logistics expansion in key markets is a arguably eventually a way to aid in its product differentiation efforts, through higher quality products at lower production costs (Toyota Motor Corporation; Google; Google (b); “Ford Motor Company”; “Toyota Motor Corporation”) G. Customer Service Levels, Customer Satisfaction, Issues Toyota’s customer satisfaction levels and levels of customer service have been historically high, with its saturation of many markets with distribution channels and manufacturing facilities to stay close to the customer. There were problems in the years leading up to the present in quality and service that are being addressed up to the present. For Ford the challenge includes maintaining service levels in the face of rising demand and rising production (Toyota Motor Corporation; Google; Google (b); “Ford Motor Company”; “Toyota Motor Corporation”; Seetharaman; Vandezande). Works Cited Apostolides, Zoe. “Ford to expand Chinese operations to meet domestic demand”. Automotive Logistics. 23 October 2013. Web. 4 December 2013. < http://www.automotivelogisticsmagazine.com/news/%E2%80%8Bford-to-expand-chinese-operations-to-meet-domestic-demand> Cole, Robert. “What Really Happened to Toyota?” MIT Sloan Management Review. Summer 2011. Web. 4 December 2013. Durisin, Megan and Trudell, Craig. “GM Passes Toyota to Win JD Power Quality Survey”. Bloomberg. 2013. Web. 4 December 2013. < http://www.bloomberg.com/news/2013-06-19/gm-passes-toyota-to-win-j-d-power-quality-survey-for-first-time.html> “Ford Motor Company”. Gale Directory of Company Histories. 2013. Web. 4 December 2013. Google. “Ford Motor Company”. Google Finance. 2013. Web. 4 December 2013. Google (b). “Toyota Motor Corp” Google Finance. 2013. Web. 4 December 2013. Quintaro, Paul. “Ford Set to Launch Largest Expansion of Manufacturing Operations in 50 Years, Expecting 8 New Assembly, 6 New Powertrain Plants”. Benzinga. 7 October 2013. Web. 4 December 2013. Seetharaman, Deepa. “ The Surge in US Auto Sales Is Hurting Product Quality”. Business Insider. 2013. Web. 4 December 2013. < http://www.businessinsider.com/surging-auto-sales-hurting-product-quality-2013-10> Toyota Motor Corporation. “Worldwide Operations”. Toyota.com. 2013. Web. 4 December 2013. < http://www.toyota-global.com/company/profile/facilities/worldwide_operations.html> “Toyota Motor Corporation”. Gale Directory of Company Histories. 2013. Web. 4 December 2013. Vandezande, Luke. “Ford Rethinks Product Launches After Quality Concerns”. AutoGuide.com. 2013. Web. 4 December 2013. Worthington, David. “Ford’s Asian Operations Overtaking Europe, US”. SmartPlanet. 2013. Web. 4 December 2013. < http://www.smartplanet.com/blog/bulletin/fords-asian-operations-overtaking-europe-us/> Read More